A C corporation earns $ 7.90 per share before taxes and the company pays a dividend of $ 5.00 per share. The corporate tax rate

Question

3 years ago

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A C corporation earns $ 7.90 per share before taxes and the company pays a dividend of $ 5.00 per share. The corporate tax rate

is 39%, the personal tax rate on dividends is 15%, and the personal tax rate on non-dividend income is 36%. What is the after-tax amount an individual would receive from the dividend?

Business

1 answer:

Leviafan [203] · Answer 1 · 2022-07-22T20:09:03+03:00

Answer:

$4.55

Explanation:

The corporate tax rate is applied to the net income, not the dividends

And the personal tax rate is applied to non-dividends income so it is not relevant here.

The stockholder would receive $5.00 before taxes. and it will pay 15% for this in taxes.

$5 x 15% = $0.45 dividend taxes

after tax $5 - $0.45 = $4.55